Crops Analysis | March 9, 2023
Advice: We advise corn hedgers and cash-only marketers to sell another 15% of 2022-crop to get to 65% priced in the cash market. We also advise all corn producers to sell an initial 15% of expected 2023-crop production for harvest delivery.
Price action: May corn futures fell 14 cents and settled at $6.11 2/4, the lowest level since August 2022.
Fundamental Analysis: Yesterday’s USDA report that reduced demand weighed on prices and had snowball-effect selling throughout the day. The Rosario Grains Exchange cut its Argentine corn crop estimate to 35 MMT from 42.5 MMT, below the USDA but in line with many predictions.
Doubts about whether Russia will allow an extension of the Black Sea Grain Initiative begin to rise as Russia states the deal is “half-implemented,” Reuters reports. Russia Foreign Minister Sergei Lavrov said Russia is allowing Ukrainian exports under the impression that barriers would be removed from Russian exports, which has not happened. While Russia is not content, officials are sitting down with the UN trade official next week to discuss the deal.
Export sales surprised to the upside this morning after USDA reported sales of 1.412 MMT for the week ended March 2, over double the previous week and up 57% from the prior four-week average. Expectations were 600,000 MT to 1.2 MMT. February 24 through March 2 corn prices saw extensive selling. Buyer interest picking up as prices drop is key to establishing demand for physical corn and giving confidence back to corn bulls. Exports have been overall lackluster for the marketing year and USDA has been slow to lower export forecasts, which indicates potential surprise cuts in the future if exports do not continue to outperform.
Technical Analysis: May corn futures traded in a 19 1/2-cent range and closed on the lows. Prices broke down from a bearish pennant pattern yesterday and continued lower today to prices not seen since August 2022. Bears are ultimately aiming to break May futures below $6.00, below the August 3 low. There is very little support until then. Bears maintain the technical advantage. Moving averages are rolling over as well, confirming the new bearish trend. Bulls want to reclaim previous support, now resistance, at $6.30 with additional resistance at $6.24 1/2 on the way.
What to do: Get current with advised sales. Be prepared to make additional sales on a corrective price rebound.
Hedgers: NEW ADVICE -- Sell another 15% of 2022-crop to get to 65% priced in the cash market. Also sell an initial 15% of expected 2023-crop production for harvest delivery.
Cash-only marketers: NEW ADVICE -- Sell another 15% of 2022-crop to get to 65% priced. Also sell an initial 15% of expected 2023-crop production for harvest delivery.
Fundamental analysis: The soybean complex today was pressured by disappointing weekly U.S. export sales data and by big sell offs in corn and wheat futures. USDA this morning reported net soybean sales reductions of 23,000 MT for week ended March 2, a new marketing-year-low. Traders brushed aside a USDA daily export sale of 184,000 MT of soybeans for delivery to “unknown destinations” during the 2022-23 marketing year.
Soybean traders also seemingly ignored the Rosario Grains Exchange dropping its Argentine soybean crop estimate by 7.5 MMT, to 27 MT, which would be the smallest crop since 1999. It could be that the lower South American soybean production this year is already factored into futures prices.
The soybean meal futures market remains the stalwart that is keeping soybean futures prices afloat. USDA reported the U.S. imported the highest amount of soybean meal ever in January. There are no strong, early chart or fundamental clues that suggest the meal futures market is close to topping out.
Technical analysis: The soybean bulls still have the firm overall near-term technical advantage. The next near-term upside technical objective for the soybean bulls is closing May prices above solid resistance at the February high of $15.49 3/4. The next downside price objective for the bears is closing prices below solid technical support at the February low of $14.77 3/4. First resistance is seen at today’s high of $15.28 3/4 and then at this week’s high of $15.38 1/2. First support is seen at today’s low of $15.05 1/2 and then at $15.00.
The soybean meal futures bulls have the solid overall near-term technical advantage. A 4.5-month-old price uptrend is in place on the daily bar chart. The next upside price objective for the meal bulls is to produce a close in May futures above solid technical resistance at $500.00. The next downside price objective for the bears is closing prices below solid technical support at the March low of $465.80. First resistance comes in at today’s high of $492.50 and then at the contract high of $498.00. First support is seen at this week’s low of $480.10 and then at $475.00.
Soybean oil bears have the firm overall near-term technical advantage. The next upside price objective for the bean oil bulls is closing May prices above solid technical resistance at 62.50 cents. Bean oil bears' next downside technical price objective is closing prices below solid technical support at the July low of 53.92 cents. First resistance is seen at today’s high of 59.65 cents and then at 60.00 cents. First support is seen at 58.22 cents and then at 57.50 cents.
What to do: Get current with advised cash sales. Be prepared to advance sales.
Hedgers: You have 70% of 2022-crop sold in the cash market. No 2023-crop sales have been advised.
Cash-only marketers: You have 70% of 2022-crop sold. No 2023-crop sales have been advised.
Price action: May SRW futures fell 21 3/4 cents to settle at $6.65 3/4, near the session low. May HRW futures fell 23 cents to $7.77 1/4, also on the session low. Spring wheat futures fell 22 3/4 cents to $8.15 3/4.
Fundamental analysis: Wheat futures saw extensive losses today despite uncertainty on the Black Sea Grain Initiative, giving doubt whether the deal will be renewed before the current deal expires next week. UN trade officials are meeting with Russian officials next week, but the outlook is grim. As the Russia-Ukraine war continues to wage on, Ukraine wheat production is expected to fall 34% year over year to 34 MMT due to lower yields and fewer planted acres.
U.S. wheat exports were reported at 266,700 MT, down 6% week over week, but is up 11% from the prior four-week average. While exports have not been bad, outstanding sales of bushels have been falling on a weekly basis without many new sales to give confidence that the USDA export forecast will be hit. Most of the current shipments have been old sales, so more buyers need to step in and take advantage of the lowest prices since July 2021.
Technical analysis: May SRW futures fell to the lowest level in 18 months after trading in a 27 1/4-cent range and closed on session lows. Bears maintain the technical advantage in the three wheat contracts. Support is hard to come by in SRW and despite oversold conditions the market continues lower. Bulls ultimately want to try to rally and put in a higher high, above $7.21 3/4. Additional resistance comes in at the psychological $7.00 level with minor resistance on the way at $6.91 1/2. Support comes in at the psychological $6.50 level with additional support at $6.31 3/4. May HRW bulls are fighting a similar uphill battle, targeting a higher high at $8.32 3/4. Additional resistance comes in at $8.12 1/2 and the psychological $8.00 level. Support comes in at the $7.50 level coinciding with the January 2022 low at $7.47 1/2. Bulls in all three wheat markets want to put together a series of higher lows and higher highs before considering a bottom might be in.
What to do: Wait on an extended price rally to increase cash sales.
Hedgers: You should be 85% sold in the cash market on 2022-crop. You should be 30% forward-priced on expected 2023-crop for harvest delivery next year.
Cash-only marketers: You should be 85% sold on 2022-crop. You should also be 30% forward-priced on expected 2023-crop production for harvest delivery next year.
Price action: May cotton fell 44 points at 82.18 cents and nearer the session low.
Fundamental analysis: The cotton futures were pressured today by sell-offs in the grain futures markets as well as lower crude oil and U.S. stock index prices.
Weekly USDA export sales were also disappointing to the cotton market bulls. The agency reported net U.S. cotton sales of 114,500 running bales (RB) for 2022/2023 were down 33 percent from the previous week and 57 percent from the prior 4-week average. Increases were primarily for Vietnam (44,700 RB), Turkey (17,400 RB) and China (15,300 RB). Net sales reductions of 68,300 RB were reported for the 2023/2024 marketing year. Exports of 287,500 RB were up 38 percent from the previous week and 44 percent from the prior 4-week average. The destinations were primarily to Pakistan (75,100 RB), China (54,400 RB) and Vietnam (47,500 RB).
Technical analysis: Cotton bulls and bears are still on a level overall near-term technical playing field amid recent choppy trading. The next upside price objective for the cotton bulls is to produce a close in May futures above technical resistance at the January high of 89.31 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the late-November low of 77.02 cents. First resistance is seen at today’s high of 83.72 cents and then at 85.00 cents. First support is seen at the February low of 80.88 cents and then at 80.00 cents. .
Hedgers: You should be 70% sold in the cash market on 2022-crop production. You also should have 20% of expected 2023-crop forward sold for harvest delivery.
Cash-only marketers: You should be 70% sold on 2022-crop production. You also should have 20% of expected 2023-crop forward sold for harvest delivery.
